January 14, 2022

CANADA CANNABIS SPOT INDEX — January 14, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending January 14, 2022
CCSI image 1 2022-01-14

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$5.08 per gram this week, up 1.2% from last week’s C$5.02 per gram. This week’s price equates to US$1,834 per pound at the current exchange rate.

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This week we review Canada’s recreational cannabis store count. The number of stores continues to climb steadily across the country, making the legal cannabis system more accessible to consumers, or in some cases increasing competition amongst retailers in more saturated local markets. 

 

Our latest count shows the number of stores open for business reached 2,967 as of the end of December. That figure is up by 1,562 stores, or a jump of  111%, compared to December 2020. As can be seen in the chart below, we expect that trend to continue throughout this year but at a slightly slower rate.

SOURCE: Cannabis Benchmarks

With each province having different licensing processes, we have seen different growth rates in the number of retailers over the past year. Some provinces still have a public ownership model for brick and mortar stores, while the provinces with the largest number of stores have typically privatized the retail sector. 

 

Ontario had always been set up for private stores, but the method of issuing licenses changed from a limited lottery system to a more open licensing process in early 2020. Subsequently, Ontario was the shining star for the cannabis space, with 1,093 new stores open during the 2021 calendar year. After the slowest initial rollout of licensed stores among all provinces, Ontario now has 1,417 stores. This figure is double that of Alberta, but there is still room to grow. Ontario’s population is 3.3 times that of Alberta, therefore we could see Ontario’s store count continue to grow to over 2,400 to have an equivalent per-capita level to Alberta.

Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

14 January 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

U.S. Cannabis Spot Index — January 14, 2022

U.S. Cannabis Spot Index — Published January 14, 2022

The U.S. Cannabis Spot Index decreased 1.6% to $1,297 per pound.

 

The simple average (non-volume weighted) price decreased $11 to $1,576 per pound, with 68% of transactions (one standard deviation) in the $787 to $2,366 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $2.86 and the simple average price was $3.48.

 

The relative frequency of transactions for indoor product decreased 2%, that for deals for greenhouse product increased by 2%, while that of outdoor flower was unchanged.            

 

The relative volumes of indoor flower fell 3%, while that of greenhouse flower rose 1%. Outdoor flower’s relative volume increased by roughly 1%.

 

U.S. outdoor grown flower jumped $17.96 per pound this week with legacy states putting in a mixed performance. Average weekly losses across Washington, Oregon, California and Colorado have been narrowing with harvest season and some states appear to have had a holiday price bump. 

 

The 20 week average price per pound loss in U.S. outdoor grown spot has narrowed to -$8.02. Washington state outdoor grown tacked on over $22.29 this week. The 20 week average price per pound change in Washington is -$10.15. Oregon outdoor grown shed $16.20 per pound this week. The average weekly price change per pound in Oregon is -$13.53. California outdoor grown prices fairly skyrocketed this week, gaining over $56 per pound. Average weekly losses in California outdoor grown have narrowed to -$7.13 per pound. Colorado outdoor grown fell nearly $36 per pound this week. Colorado outdoor grown losses have also been narrowing with the average weekly loss at just -$6.29 per pound this week. 

 

 

In order to reverse losses in the outdoor flower market, demand is going to have to vastly expand and fundamental regulatory changes, a tax holiday for instance, will have to occur nearly simultaneously. Is there a chance these two events will happen? California will be considering tax reform this year, as noted below, and some state data is showing consumers slowly moving toward edible and other extraction products. However, shifts in demand trends in legal markets have generally been gradual. Similarly, changes to California’s tax regime would have to be instituted by the legislature, and even if passed are not likely to be implemented until late this year at the earliest, and possibly not until 2023. 

 

That said, some outdoor pricing downtrends are slowing. This does not necessarily mean an uptrend is starting, especially in light of what available data and accounts from operators have shown was significant year-on-year growth in outdoor harvest volumes in 2021. For context, market participants in California and Oregon both reported large amounts of supply from 2020’s outdoor crop persisting in the market deep into 2021. With even bigger harvests brought in last year and demand stagnating, we can expect outdoor-grown inventory from 2021 to remain available well into this year.

 

 

February 2022 Implied Forward assessed down $25 to $1,320 per pound.

 

The average reported forward deal size declined to 60 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were unchanged at 37%, 47%, and 16% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 79 pounds, 52 pounds, and 42 pounds, respectively.

At $1,320 per pound, the February 2022 Implied Forward represents a premium of 1.7% relative to the current U.S. Spot Price of $1,297 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines from this week's Premium Report:

California

Newsom Budget Will Work to Save Legal Cannabis Industry

Oklahoma

Big December Dip in Licensees Explained

Colorado

Wholesale Cannabis Prices Hit November Retail Sales

Arizona

Arizona Adult Use Sales Share Tops 50%

 

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

14 January 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

January 7, 2022

U.S. Cannabis Spot Index — January 7, 2022

U.S. Cannabis Spot Index — Published January 7, 2022

The U.S. Cannabis Spot Index decreased 5.3% to $1,277 per pound. The simple average (non-volume weighted) price decreased $64 to $1,588 per pound, with 68% of transactions (one standard deviation) in the $817 to $2,359 per pound range. The average reported deal size increased to 2.3 pounds. In grams, the Spot price was $2.82 and the simple average price was $3.50.

 

The relative frequency of transactions for indoor product decreased 2%, that for deals for greenhouse product increased by 2%, while that of outdoor flower was unchanged. 

           

 

The relative volumes of indoor flower fell 3%, while that of greenhouse flower rose 1%. Outdoor flower’s relative volume increased by roughly 1%.

 

One way to view the large drop in spot prices is through what is known as discounting: the notion that market prices reflect all currently available market information and expected future information. So sellers might see a future where cannabis prices are significantly lower than they are currently and decide to shed inventory now, rather than store it in hopes of higher prices in the future. 

 

Discounting future prices is an inexact science in commodities pricing where conventional wisdom dictates the future price is today’s price with the cost of carry (storage costs) until the delivery date. Sophisticated futures markets take into consideration complex supply and demand factors and fundamental economic predictions when thinking about future prices. There is enough information in the cannabis market for growers, as well as other buyers and sellers along the supply chain, to correctly predict more supply in the future as more states join the ranks of legal cannabis markets. Operators in legacy states that have undergone previous sell-offs may be betting future prices are likely to be lower given current oversupply conditions and recent plateauing demand in local markets. While there are potential fundamental factors that suggest prices might be higher in the future – California may rescind the local control option, Oregon may limit retail outlets, or federal legalization may increase demand – none of these future events are certain. Price action suggests growers are seeing more evidence of surplus than scarcity now and in the future – and acting on it.

The July 2022 Implied Forward initially assessed at $1,400 per pound. The average reported forward deal size declined to 64.6 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 37%, 47%, and 16% of forward arrangements, respectively. 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 94 pounds, 51 pounds, and 35 pounds, respectively.

At $1,345 per pound, the February 2022 Implied Forward represents a premium of 5.3% relative to the current U.S. Spot Price of $1,277 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

average reported forward deal size was nominally unchanged at 66 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 36%, 48%, and 16% of forward arrangements, respectively.

 

The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 97 pounds, 52 pounds, and 36 pounds, respectively.

 

At $1,345 per pound, the January 2022 Implied Forward represents a discount of 0.3% relative to the current U.S. Spot Price of $1,349 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines from this week's Premium Report:

Illinois

Adult Use Sales Skyrocket in December

AlaskaOregon

2021 Outdoor Harvest Volume Soars 55%

Montana

Adult Use Sales Commence

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

07 January 2022.  Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — January 7, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending January 7, 2022
CCSI image 1 2022-01-07

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$5.02 per gram this week, lower from last week’s C$5.05 per gram. This week’s price equates to US$1,791 per pound at the current exchange rate.

Include your weekly wholesale transactions in our price assessment by joining our Price Contributor Network

If you have not already done so, we invite you to join our Price Contributor Network, where market participants anonymously submit wholesale transactions to be included in our weekly price assessments. It takes two minutes to join and two minutes to submit each week, and comes with loads of extra data and market intelligence.

This week we continue to examine data published in the Ontario Cannabis Store’s (OCS) quarterly Cannabis Insights report, which covers the period from July through September 2021. The report contains a wide variety of useful data detailing how Ontario’s market has developed.

This report focuses on the proportion of sales dedicated to cannabis 1.0 and 2.0 products in Ontario. As a reminder, cannabis 1.0 references the legalization of combustible cannabis flower, cannabis oils, and cannabis seeds in October 2018.  A year later cannabis 2.0 began; making available to consumers derivative products such as vapes, edibles, beverages, concentrates, and topicals. The data aggregated in today’s CCSI report reviews a series of OCS quarterly reports to compile a complete view of the trends following the introduction of cannabis 2.0 products. 

 

Cannabis 2.0 products created a lot of excitement ahead of their legalization and sales from the different product categories were expected to grow rapidly. With over two years of data, however, we currently see that cannabis 2.0 products make up only a small portion of total sales. As seen in the chart below, total cannabis sales in Ontario have been accelerating with the rapid build-out of brick-and-mortar stores. Since its full roll-out, however, cannabis 2.0 product sales have averaged approximately 23% of total legal Ontario cannabis sales.

SOURCE: Cannabis Benchmarks, OCS

Diving deeper into the cannabis sales mix, we see that most consumers prefer the traditional smokeable or inhalable products (dry flower or vapes, respectively), with all other derivative products making up a very small proportion of total sales. That being said, we do see a small increase in spending towards consumable cannabis products as seen in the chart below, which compares the sales mix from September 2020 to September 2021.

SOURCE: Cannabis Benchmarks, OCS
The cannabis industry was hoping for cannabis 2.0 products to capture a larger proportion of sales dollars, as they generally command a premium for the same cannabis input and the product differentiation would pull consumers towards legal supply channels. Consequently, these stats are likely disappointing to Canadian cultivation and processing businesses, which had placed large bets on the cannabis 2.0 release.

Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

07 January 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved